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Countdown’s comp sales strongest in seven years

Woolworths Group has increased its net profit after tax by 12.5 per cent year over year, reaching NZ$1.88 billion for the FY18 period.

Group sales from continuing operations rose 3.4 per cent to NZ$62.67 billion, while basic earnings per share rose to NZ$1.36, an 11.4 per cent increase.

Woolworths Group CEO Brad Banducci said the group’s focus on putting customers first remains at the core of what the group does.

“All businesses saw an increase in customer satisfaction and traffic (transactions) during the year. This has led to strong sales and EBIT growth and a significant reduction in net debt, even as we invest in strategic initiatives focused on delivering sustainable growth int4o the future,” said Banducci.

“Having fixed the basics, our focus is shifting to being ‘consistently good’ at the fundamentals and creating meaningful shopping differentiations in the eyes of our customers.”

Banducci noted the group’s intentions to leverage data and digital to transform its businesses and deliver sustainable growth for shareholders.

The group’s New Zealand supermarket sales reached NZ$6.4 billion for the year, an increase of 3.4 per cent on the previous year. Comparable sales also increased 3.4 per cent for the year, marking the strongest comparable sales performance in seven years.

Online sales grew in the double digits, thanks to the retailer’s expanded delivery capacity, reduced delivery fees and the launch of free pick-up for orders over NZ$50.

Following the launch of Woolworths’ digital innovation hub, WooliesX, in Australia, the group established CountdownX in New Zealand in June to ensure its Kiwi supermarket business maintains a leadership position and continues to enhance its digital and data capabilities.

Woolworths reported a slight slowdown in sales growth due to the scheduled closure of three Countdown stores in the second half of FY18 and accelerating deflation, which led to a 1.8 per cent decline in average prices.

Over 4500 products are now part of Woolworths’ price down program, but improvements in stock loss and process excellence offset the increased price investment, leading to relatively unchanged gross margins.

The group’s cost of doing business in its New Zealand food business as a percentage of sales increased 56 bps on the previous year driven by investment in the store team to improve the customer experience and further strengthen digital capability, with the result that EBITDA and EBIT decreased 3.6 per cent and 8.2 per cent respectively.

Return on funds employed declined by 100 bps in FY18 to 9.5 per cent largely due to the reduction in EBIT following the investments detailed above.

Drinks and department stores

Woolworths’ Endeavour Drinks business saw increased comparable sales by 3.6 per cent. Sales growth remained robust in the second half of the financial period, though EBIT growth was lower due to increased price competition impacting Dan Murphy’s.

While the group claims BWS is leading in on-demand delivery, it noted there is more work to do to position its drinks business for medium-long term growth through digital, range, service and convenience.

“Big W progressed its turnaround in FY18,” said Banducci.

“Prices are significantly more competitive than this time last year, the majority of stores have been refreshed and the range is beginning to resonate with customers.”

Comparable sales for the department store rose 0.9 per cent for the period, the first increase since FY09, however the business saw a loss before interest and tax of $110 million.

“In FY19, we expect a further reduction in losses as we continue to build momentum in the business but, as always, financial performance will depend on trading over the key Christmas period,” said Banducci.

Banducci noted the group was pleased with the progress made in FY18 and “remained energised by the material opportunities we have to create a better business for our customers, team members and shareholders in the future”.

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